While at an empty open house, another broker and I got to talking.
She told me this: One of her buyers had dropped out because that buyer had lost $80,000 from her investment portfolio. The broker rolled her eyes and said that was $80,000 more than she’s ever had in investments. I am hearing a lot about investments flattened by the economic crisis. I also hear a lot of people comparing what they have and what they lost to what someone else had and lost.

And that brings me to today’s real estate discussion: poverty and housing

Today, I found out about a promotion that is different than anything I have ever seen before. I’ve seen “Big Move” advertising blitzes, special open house weekends (where every listing is open), and give-aways of televisions, vacations, and even a car. But this is widespread and different. Coldwell Banker Residential Brokers is holding a sale. They are convincing their sellers to lower their prices for ten days, starting this Friday, October 10th. Reuters covered it today.

This is an encore (a disingenuous name for a repeat.)
This entry was posted August 22, 2007. Back then, the comments feature wasn't working and not many people knew we were writing here. Much of it is even more true today than it was 14 months ago:

Whenever a house sells in my neighborhood, my neighbors ask me, "how much?" Then one will say something like this: "If he got $325,000 then my house is worth $390,000..."Invariably, my neighbor has inflated his home's value by $20-30,000.

Why is this? According to Daniel Gilbert in Stumbling on Happiness we agree with information that reinforces what we already believe. Therefore, the single fact of one house sale allows my neighbor to feel confident about his (wrong) price.

The S&P/Case-Shiller Home Price Index for July was released this morning and it shows that the downward trend in prices is continuing nationally. Many cities tracked by the index are still seeing double-digit declines in the sale prices of existing single-family homes.

Both the 10-city and 20-city composite indexes reached new record annual declines, 17.5% and 16.3%, respectively, according to Standard & Poor’s. The 10-city index –- which is a value-weighted average of the 10 original metro areas followed by Case-Shiller, including Boston –- has recorded declines every month since October 2007.

Boston is still among the stronger markets on the list, having been one of five cities to record a positive return in home prices for three months or more. The other “strong performers” are Atlanta, Dallas, Denver, and Minneapolis.

From June to July, Boston recorded a 0.2% increase in sale prices. It’s not much of an increase, but it’s better than Las Vegas, which was the weakest market for the month and recorded a 2.8% decline.

However, every city tracked by the Case-Shiller index has negative annual returns.

When looking at the one-year change in home prices, the weakest market is again Vegas, which posted a 29.9% decline in home prices in July when compared with July 2007.

On the other end of the scale, Charlotte was the “top” performer for the period, recording a decline in sale prices of only 1.8%. The list of the five cities that had the best performance for the year-over-year period is rounded out by Dallas (2.5% decline), Denver (4.7% decline), Boston (5.4% decline), and Portland (6.6% decline).

What does this all mean overall? Here’s what David M. Blitzer, chairman of the index committee at Standard & Poor’s, said in today’s news release: “While some cities did show some marginal improvement over last month’s data, there is still very little evidence of any particular region experiencing an absolute turnaround.”

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From my email last week:

At 10:35 AM 9/25/2008, you wrote:

Hi Rona,

.... My wife and two daughters and I are anxious to buy a home in ________ we love it: its close to work (I’m in _____[the next town]), good schools, and the community is terrific.

The problem is that we feel like there is basically nothing in ________ for us. We do have $150K to put down on a house, but with only my salary to work from ($60K/year) we just cant handle a big mortgage payment. ....
Are we being unrealistic in thinking that the market in ________ will ever come down to our level?

I told this reader to keep renting.

****

This email put a great big spotlight on the question of single-income families. How do they make it in Massachusetts?

I got soaked today, literally. Tuesday, I wrote about Walk/Ride day. Well, I am not on bicycle, but I hoofed it at lunch to run my errands...The weather is not the only unpredictable thing these days.

It is hard to know what is going to happen economically over the next few years. We are on the eve of a national election, our banking system is in chaos, and the state tax structure is up for ballot question. This week has been unrelenting: bad news, indecision, confusion...and my phone ringing with buyers who want to buy...huh?

The uncertainty affects people in many ways, but what I see most often with prospective buyers is one of these two reactions:

1. Burrow into a nest (home) and weather the storm as best you can.
2. Freeze, stay where you are, and weather the storm as best you can. (Some of these buyers come back years later, when they see better opportunities.)

For those interested in data, here’s another look at the real estate numbers from August, according to the Warren Group, a real estate data firm that tracks sales of all properties using records at the state’s registries of deeds.

In the first eight months of 2008, all but one of the 14 counties in Massachusetts have posted double-digit declines in sales of single-family residences. Sales in Barnstable County, which encompasses Cape Cod, declined only 2.5 percent when compared with the same period in 2007. It likely has fared better, relatively speaking, because it’s an attractive market for second-home owners.

During the same time, only one county saw an increase in condo sales. Franklin County in Western Mass. posted a nearly 3 percent increase. The rest saw double-digit sales declines. For the state overall, condo sales from January through August declined just over 25 percent when compared with the same eight months in 2007.

Meanwhile, in the same period the median sales price for the state slid about 9 percent. The median price is $318,000 -- meaning half the sales were for properties valued under $318k and the other half were valued at more than that.

Well, data released yesterday on August sales in Massachusetts made me grateful that I’m not a real estate agent working on commission.

The Warren Group, which publishes Banker & Tradesman, reported single-family home sales declined nearly 15 percent when compared with August 2007. For the first eight months of the year, sales are down nearly 17 percent and the median sale price is down about 9 percent. Meanwhile, the Massachusetts Association of Realtors said the homes that were sold through the state’s Multiple Listings Services spent an average of 130 days on the market before being sold. That’s up from 127 in August 2007.

In Globe reporter Jenifer McKim’s story today on the August numbers, Wellesley College economics professor Karl Case says he’s tossed his latest forecast for a possible housing recovery in early 2009. It’s a hard call to make with Congress and the Bush administration trying to pull together a $700 billion bailout bill for several giant Wall Street institutions.

“An enormous question is how far will prices fall before they quit,” Case told McKim. “I don’t have any confidence in any forecast I’ve seen. There’s so much uncertainty it is hard to be specific because we don’t know the answers.”

How about you, do you think there’s even a remote chance sales may begin to rise in 2009 – depending on the bailout and election outcomes? What about prices, how much further do you think they could fall in Massachusetts?

And what about your own housing situation, does the uncertainty have you rethinking plans to buy, or trying to figure out how to delay selling? I’d be interested to hear your experiences. (Jenifer McKim would also be glad to hear from you too. She’s working on a story on that topic, and she can be reached at jmckim@globe.com.)

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Three months ago I first heard about Walk/Ride Friday. This month, I am ready for it. Walk/Ride Days occur on the last Friday of every month - September 26th this month. On these days people everywhere are invited to go, and wear green! It is an initiative of Green Streets. Their vision is to create a monthly city-wide party, which celebrates alternative transportation, gives people an opportunity to make community connections, and promotes a festive local atmosphere. So far, there's a handful of businesses helping out in Boston, Somerville, Cambridge, and Medford. But this is a project that is just beginning to take hold.

The weather has changed in real estate again. We are in the autumn market. All of a sudden, there are more homes for sale, and more new choices for my buyers. I'm happy with what I have seen this weekend.

Why the change? It happens every year around this time. The autumn market is sort of like a mini-spring market. Buyers generally want to move sometime other than the winter. Most want to move in time to start the school year in a new place; thus we have the spring market. Then, around late July, buyers and sellers get bored with real estate. They want to go on vacation without thinking about houses; thus we have the summer doldrums. Now vacations are over. People are thinking about buying and selling before the winter sets in. Sometime between Veteran’s Day and Thanksgiving, it will probably slow down again. Sales volume is down this year, but the seasonal pattern remains.

Yesterday’s post about down payments generated a lot of comments from people frustrated by Massachusetts’s pricey real estate market. With asking prices still high in the Boston area and other parts of the state, it’s harder to come up with an adequate down payment, never mind a 20% down payment.

Unfortunately I don’t have any news to comfort folks today. Instead, I have more fodder for arguments the area needs a reality check on real estate prices.

According to Coldwell Banker’s home price comparison index, released yesterday, the list of the country’s most expensive housing markets is dominated by California. However, Boston cracked the top 10.

I get asked regularly about how deep the discount for short sale and foreclosure homes are in my area. My answer is “barely deep enough to be worth it.” When I work with buyers of this kind of property, I prepare them for a long wait, more aggravation, more risk...and some financial reward.

Only undertake a short sale if you have time, flexibility, and risk tolerance. Some things that I regularly see:

1. Slow communication with the investor’s office, which must approve all contracts.
2. Generally poorer condition of the property.

Boston and Denver were the best-performing markets on the Case-Shiller Home Price Index for June. Now, that doesn’t mean we’ve seen an overnight turnaround, it just once again means that among the suffering, the Boston region is suffering slightly less.

Of the single-family homes that were sold in June, there was a 1.2% gain in prices in Boston, and a 1.5% gain in Denver. That is the third consecutive month of positive returns in both markets, according to the folks at Standard & Poor’s who issued the latest Case-Shiller report yesterday. (Both Charlotte and Dallas have posted four months of gains.) The index tracks only properties that have been previously sold and compares current sale prices to past prices.

Nationally, there was a 14.2% decline in prices in the first quarter, and Case-Shiller’s 10-city and 20-city composite indices both hit record declines, 17% and 15.9%, respectively.

With real estate sales and property values sliding all across the country, some homeowners are at risk of “being underwater on their mortgages,” or owing more on their home than it is currently worth.

Nearly one-third of the country’s homeowners may be in that predicament now, according to Zillow.com’s second quarter Real Estate Market Report, which is being released today.

Nationwide, 29.1% of homeowners who purchased their homes since January 2003 now have negative equity, the online real estate data company reports. The highest rates of negative equity were found in homes purchased in 2006, at the top of the market in many areas. (In Stockton, Calif., 95% of homeowners who got into that overheated market in 2006 are now underwater, according to Zillow.)

Last week, my nephew Nate stayed with us. Nate is 21, a college graduate in mathematics, with a minor in political science from UConn. He’s moving to Boston. He began job hunting and the neighborhood research toward finding an apartment to share with other recent grads.

The Boston Globe just published two articles about young adult housing. One discussed how recent graduates should not jump into buying a condo or starter home.

The second Boston Globe article reports that higher number of juniors and seniors are choosing dormitory housing because of increased costs.

The Case-Shiller Home Price Index for May was released this morning, and it looks like another case of the Boston market outperforming those in other major cities. Prices are still declining; they are just not falling as fast as they are in other markets.

Boston was among the top five performers on the Case-Shiller composite index of single-family house prices in 20 cities in May. In the previous month, Boston had been number six. For May, Boston edge out Seattle out of the top five by a fraction of a percentage point.

Elsewhere on Boston.com today you should see a report by Globe reporter Kimberly Blanton that says real estate sales continued to slide in June, making the first half of this year the state’s slowest housing market in more than 15 years.

In June, single-family home sales declined about 15 percent and condo sales were down more than 20 percent, according to separate reports issued today by the Massachusetts Association of Realtors and Warren Group, which publishes Banker & Tradesman and tracks sales of all properties in the state.

However, the MAR, which reports only on sales handled within the state’s Multiple Listing Services, indicates that the inventory of residential properties available for sale was down 6.7 percent, to 50,705 listings, as of June 30. That's a somewhat encouraging sign, according to the association. At the current sales pace, this is an 8.3 months supply – the lowest supply level since June last year, according to the MAR. Just four months earlier, in February, the state had a 16.6 months supply.

But the average number of days that properties lingered on the market before being sold was up when compared with the year-ago period. Single-family homes spent an average of 129 days on market, up 2.3 percent from 126 days in June 2007. Meanwhile, condos were on the market an average of 140 days, up 12.9 percent from 124 days in June 2007.

By these numbers it looks to me like more sellers are deciding to hold off trying to sell in the current market, as opposed to more buyers jumping into the market. Is anyone out there encouraged by the supply and DOM data?

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I’ve been having some fun with the CNN Best Places to Live Poll. I hope you will, too.

CNN is saying three towns in our area are a good deal based on housing, financial and quality of life. Within housing, affordability counts. How did anything near Boston make the top 100?

Here’s my two cents on the local winners:

OK, national economy watchers, today is your day. I found a fairly concise report on real estate economics that will give you something to chew on. Feel free to read the whole thing (six pages.) Summary: Although some national economists think we are in for a long recession, some see recovery on our doorstep. Who do you believe, and why?

Money magazine's Real Estate Survival Guide, included in the June issue, has an interesting chart looking at single-family home prices in the 100 biggest US markets and forecasting what will happen to those prices by May 2009.

Anyone who is currently trying to scrape together enough cash for a decent down payment -- and worried he or she won't be able to do so before prices suddenly start shooting up -- may find some comfort in this data. Prices are expected to fall in 75 of the top 100 metropolitan areas in the next year, according to Fiserv Lending Solutions data cited by Money.

I read the local papers like they are my diary. I keep saying that real estate is a local market, I will not deny that larger economic and cultural issues will affect the way we live in the next 10-20 years. There are changes ahead in housing values.

The transportation cost increases this spring are already influencing buying and selling behavior. The past 20-30 years have been unusual in the availability of relatively cheap and safe travel options. Communication has become fast, cheap and available in many parts of the world. I know couples who set up homes in different cities and commute to see one another. Food from all over the globe finds its way to my table near Boston.

Sunday mornings, I figure out how to see the most likely property with the largest number of my clients without having an accident or otherwise wrecking havoc.

I started the in Cambridge. This was a second viewing for my buyer. The place was still filthy... There were a few buyers milling around.

Next we went to a little single family house in Arlington. It was clean and shiny, but not staged. It was swarmed with buyers. I was reminded a few times about how many people were there.

Then an overpriced single family in Arlington. The house was in nice shape, but the street and layout are atypical. Not many people there.

What I have been seeing this spring is a segmented market. Micro-markets exist in some locations and price ranges. Gus and others have wondered where these “hot spots” are. Some readers want to deny their existence.

I have reviewed the data. Nothing in it surprises me, except the number of high-end multiple offers reported. It basically confirms what I have experienced. What do you think?

A question that came up from a couple of angles in the Lowballing entry was, “How do I do a CMA in a dynamic market?’

The first principle of a good CMA is to stay current and stay local. When local isn’t possible, sometimes there are parallel neighborhoods in a town. When current doesn’t work, I must resort to time-corrective calculations (usually done by town and type of property.)

The other part of the same questions is, “If the CMA is the center of pricing and negotiation, how do markets go up and down?”

I have worked through an up market, and I have worked in a down market and I have frequently found myself in a mixed market -- like we are in right now. (There are areas where prices are going up during a national recession. It boggles the mind, but it is real.)

Most people have sold or bought a used car. Suppose a car is blue-book priced at $4000. Many sellers will ask $4500 for it, and then bargain down to $4000. If the buyer has cash, or is otherwise hassle free, the seller may go down to $3800. But would a seller go down to $3500? Not likely, unless the car is really hard to sell, he/she really needs the cash, or he/she is under-the-gun to get it sold. The buyer may pay $4200 for it, but would find another car if the seller was stuck on $4500, unless the car was very special or rare.

The same holds for real estate transactions.

More on home prices, our great preoccupation here at the real estate blog:

The Case-Shiller index, out this morning, shows the Boston market is now solidly outperforming the market in most of the nation's largest cities. Now, in these cloudy times, outperforming the average still means that prices are falling. They're just falling more slowly.

Boston prices at the end of April were down 6.4 percent compared to the same month last year, Case-Shiller reported. Only five of the 20 Case-Shiller cities posted smaller declines: Charlotte (-0.1%), Dallas (-3.4%), Denver (-4.7%), Portland (-4.7%) and Seattle (-4.9%).

Yesterday's post on the Boston market prompted some excellent discussion and questions about methodology. I wanted to make just a few points:

1. There is no question that medians are an imprecise way to capture the state of a marketplace. As several of you suggested, it is improbable that the value of homes in Winchester increased by 35 percent over the last year. It is much more likely that higher-priced homes simply comprise a larger share of sales this year.

2. That said, if you are going to use a median, you want to include as much data as possible. This increases the significance of any trend, because it limits the influence of each sale. That's why I prefer using year-to-date data instead of data for the given month. That this counts January sales over and over again is precisely the point.

3. Trends across towns still are interesting and potentially significant. Consider the map above, which shows the towns with the largest declines in median sales price so far this year. Beyond the problems in the old mill cities, it's hard to discern a pattern. To me, this reinforces why the pattern of increases in the western suburbs is so striking.

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While I am waiting to hear from y’all about your experiences with multiple offers, I want to turn my attention to the other side of this market. Today, we will discuss the tired, overpriced and/or ugly stuff that is sitting on the market begging for a buyer’s attention. Today, we discuss lowballing.

First, I would like to define my terms: Low-balling is when a buyer makes an offer well below what the property is worth. One can make an offer well below asking that is simply a low offer, but reflects knowledge of what the property is worth. It may come in lower than true value, but high enough that the seller will say “OK.” If the seller has to sell and the price is fair and reasonable (even if it is $5-10,000 below what it is worth,) you may get a "yes." That is the “sweet spot” that I look for when I am negotiating for my buyers. Sellers do not give huge discounts to strangers. If he/she is selling for $50K less than it is worth, they will not sell or sell to a relative.

This season, I made two offers which were $79,000 below asking. Neither was a lowball. I made one at $30,000 below that was a lowball. Of those, only one of the -$79,000 was accepted.

Here's the latest update of my monthly map showing towns around Boston where median single-family home prices continue to rise this year, even as prices fall sharply statewide.

The pattern remains the same: The suburban towns west and northwest of Boston, long prized for their proximity, schools and quality of life, continue to ride out the stormy market. While sales volume is down even in these towns, sales prices still are rising.

As in past months, the criterion for inclusion is an average of 10 single-family sales each month (50 sales through the end of May).

It's also worth noting that prices in a number of similar towns -- Newton, Belmont, Wakefield, Milton -- are down less than 3 percent compared to last year. The price of a single-family home in Boston also is down less than 3 percent.

Finally, there is only one town to the west of the area shown on this map where median prices are up this year: Westfield, just outside Springfield.

Here's the raw data:

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I am baffled by the segmented market we are experiencing around Boston right now. We are in a recession, yet there a many reporting that there is high demand in their segment of the market.

In an effort to get a handle on what is happening, I ask you to Click Here to take survey

Please let me know where you got into multiple offers. I will collect the data and report back on my findings next Friday.

Thank you. I hope this helps quantify what some of us are seeing out there in the so-called "buyer's market."

I am enjoying a Kick A** cupcake with a candle in it to celebrate. Tuday marks one year since I began writing here at Boston.com Real Estate Now. My first entry was posted at 4:49, June 20, 2007. It was about the importance of knowing your limits before entering a competitive offer situation, AKA, a bidding war.

Remember the client I told you about who came in second of five offers on a condo? Well, they were the bridesmaid, not the bride, again this week. They were second of three offers. The top offer had the most flexibility regarding closing time. My buyers were unwilling to allow more than two months until closing.

That brings me to today’s topic:
What is the cost and risk of delaying a closing beyond the typical 4-6 weeks between offer and closing?

A new report from the Federal Reserve Bank of Boston projects that Massachusetts foreclosures will peak no earlier than the second quarter of 2009, and perhaps not until the second quarter of 2010. The complete projections are after the jump.

The report, available here, makes the basic point that foreclosures almost always happen when a homeowner's mortgage debt exceeds the value of the home, but that only a small share of people in that situation end up in foreclosure. In other words, owing more than the value of your home is a necessary but not a sufficient condition to precipitate a foreclosure.

Most people continue to make their mortgage payments. The most obvious explanation is that they believe the value of the home will recover. The researchers also note that homeowners act as both investors and occupants. Even if a home remains a bad investment, it may be cheaper to stay and pay "rent" than to buy or rent a comparable home. In the extreme case, a person might remain in a home that has lost all of its value because their monthly mortgage payment is cheaper than any alternative.

But enough about theory. Here are the numbers.

Data for people who like data:

About 6 percent of properties for sale in Massachusetts in May were "depressed," meaning resales of foreclosures or short sales to avoid foreclosure. The market share of depressed properties has held roughly steady since February. The data comes from Movoto, a real estate search site. The term references the fact that such properties generally are sold at steep discounts.

Movoto also reports that there were 43,284 homes for sale in Massachusetts at the end of May, which is 7.4 times the number of homes sold in May according to Warren Group. This ratio is known as months of supply. I don't have complete confidence that the Movoto data and the Warren Group data are comparable, but if they are, 7.4 months of supply is frankly not that bad a number.

For the Boston area, both inventory and listing prices ticked upward in May, according to Altos Research, an analytics firm. The company says listing prices are up 2.6 percent over the last three months while inventory is up 13.4 percent. This may simply reflect the annual cycle in which inventory builds and prices rise as owners anticipate the peak of the market in the summer months.

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A beautiful new mapping tool from the Boston Fed offers a visual tour through almost two decades of Massachusetts foreclosure data. The jewel of the Web site is an interactive map that shows, like a series of time-lapse photographs, the annual pattern of foreclosures in Massachusetts since 1990.

The site also offers charts showing the history of foreclosures and housing prices in every Massachusetts city and town since 1987.

This a great resource. The data, which comes from Warren Group, is available in other places. But the Fed's interface is as good as it gets.

One thing that becomes very visible is that, consistently over the last two decades, the most vulnerable areas have been central and southeastern Massachusetts. Another striking visual is the absence of foreclosures in the early years of this century.

But perhaps it's more interesting that foreclosures remained at elevated levels all through the 1990s. Boston Fed President Eric Rosengren made this point in a speech last week: "While foreclosures peaked in 1992, they remained quite elevated through much of the decade, despite the eventual rebounding of the economy... indicating that the duration of today's situation may be longer than some are anticipating."

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The latest issue of The Economist includes a remarkable graphic charting the annual movement of home prices over the last century. The data was compiled by Robert Shiller, the Yale professor who is half the brains behind the Case-Shiller index.

The chart, at right, shows that prices could fall further in 2008 than during the worst year of the twentieth century, 1932, when prices fell 10.5 percent. Prices at the end of March this year were 14.1 percent below prices at the end of March last year.

The latest Case-Shiller data for the Boston area shows local prices are down 5.9 percent compared to last year, significantly better than the national average.

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Homes in the Boston area cost more than homes in most other places. The difference between median prices here and elsewhere is basically a "Boston Premium," an additional amount that people are willing to pay for homes near the Hub Of The Universe.

Something interesting happened to the Boston Premium during the housing boom: It got smaller. Boston housing became relatively more affordable.

The chart at right shows the ratio of the annual single-family median home prices in metropolitan Boston to median prices for the nation as a whole. In 2001, the Boston-area median home price of $331,900 was 2.12 times the national median home price of $156,600. By 2005, even as the local median peaked at $413,200, the Boston Premium had dropped to 1.89 times the national median. The data is courtesy of the National Association of Realtors.

This phenomenon highlights a great truth about the late housing boom: It disproportionately lifted the prices of the least expensive homes, because the availability of easy-money loans disproportionately increased the buying power of lower-income families.

This was true within cities: In Boston, the boom lifted Dorchester more than Back Bay. It was true within regions: In eastern Massachusetts, the boom lifted Lawrence and Brockton more than Newton and Brookline. And it was true for the nation: Prices rose most quickly in Nevada and Arizona and inland California and other historically cheap housing markets.

It is worth noting, of course, that the long-term trend remains strongly upward. Before the Massachusetts Miracle, local housing costs tracked the nation fairly closely. Now, despite a six-year decline in the Boston Premium, the local median still is almost twice as high as the national median.

But the compression still is noteworthy because it may suggest something about the future of relative home prices in a nation whose wealth and companies are increasingly distributed more evenly across the vast American landscape.

Credit: The idea of a Boston Premium is completely inspired by the "Orange Premium," brainchild of the Orange County Register's Jon Lansner.

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A 74-unit condominium building in Everett has become, with a generous dollop of state funding, a 74-unit apartment building with 47 affordable units.

The building, Parkway Heights, sits on Chelsea Street. The skyline views from the sixth floor are said to be grand. Also sweet: The developer, Winn Residential, got almost $3 million in tax credits from the state, and a $5.9 million loan from the Mass Housing Partnership, to convert the building from condos to apartments.

I'm not sure I entirely understand why it costs millions of dollars to convert condos to apartments, or luxury to affordable. Shouldn't it only cost money to convert from affordable to luxury? But maybe the building simply wasn't finished.

The initial loan was approved about a year ago. The building is now being marketed. I wandered across it while researching this morning's post and thought, what an interesting example of what can happen during a real estate downturn.

Anyone aware of other examples of condos becoming apartments?

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The decline in local home values means that many people who bought homes or refinanced mortgages in the last few years now owe more to the mortgage company than the value of their home. Such borrowers are said to be underwater, because people don't survive very long under water. For reasons discussed below, their homes are considered the most likely to be foreclosed.

The map alongside, courtesy of Zillow.com, shows the share of homeowners buying since 2005 who are now underwater by town. The data is based on Zillow's calculations of home value, which is an imperfect measure of actual value, but the overall trends still speak volumes about the areas where foreclosures likely will continue to concentrate.

The map is part of a broader report from Zillow on home values.

Borrowers who are underwater can't easily refinance or sell if they fall behind on mortgage payments. They would have to pay the difference between the sales price and debt out-of-pocket. (The alternative is a "short sale," in which the lender agrees to waive the rest of the debt.)

Underwater borrowers also tend to fall behind more easily. People will stretch to make payments, and fight to hold on, if they think their home is appreciating in value. By contrast, if they think the value is falling, the situation is more likely to seem hopeless, the loan is more likely to seem unaffordable, and the lender is more likely to end up with the keys to the home.

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Another contribution to the growing argument that our urban fringes are fraying: A study from a group called CEOs for Cities finds that low gas prices were a key precondition for the rapid rise in housing prices. Now that gas prices are rising, housing prices are falling.

The idea that price decline are hitting hardest in the exurbs -- around here, that means the I-495 corridor -- will not be new to regular readers of this blog. It seems to me that proximity to Boston is a pretty good indicator of how much value your home has lost lately.

The study, "Driven to the Brink," frames that argument about distance in terms of gas prices.

"For decades, the growth of suburban housing was predicated on cheap gas. In effect, the low price of gas made sprawl economical...

"Now that the era of cheap gas is over, demand for development on the fringe is down."

The study makes some interesting points: In 2004, adjusted for inflation, gas prices were lower than in 1990. Since then, prices have more than doubled. The study argues that has strained the budgets of home owners struggling to make mortgage payments and it has reduced the value of their homes, by making the house seem relatively more expensive to potential buyers (who will also have to pay the higher gas prices).

It also includes some pretty sophisticated mapping of price-decline patterns in cities such as Los Angeles and Tampa, showing that prices spiked particularly in the building fields of the Sun Belt, and now are declining precipitously in those same exurban areas. Some of the study's findings are based on the modeling of housing-plus-transportation affordability that I discussed in another recent post.

If you're looking for a home, have higher gas prices changed where you are looking?

Photo: Paul Sakuma/Associated Press

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Here's a bit of a conundrum for the data wonks among you: I wrote earlier this week about the Case-Shiller index, which shows that Boston-area prices declined by 4.6 percent in February. This morning I got a new report from Radar Logic, a real estate analytics firm, showing that Boston-area prices declined by 11.3 percent in February.

Boston-area homes were selling for about $200 per square foot at the end of February, according to Radar Logic. That means a 2,000-square-foot home was selling for about $400,000. Prices per square foot last reached these levels in 2003.

That's the news. Now comes something a bit technical, but hopefully worth the trip.

I'm not sure why we at the Globe focus so much on single-family homes. There were 80 percent as many condominium sales as single-family home sales in the metropolitan Boston area in the first quarter. Furthermore, I live in a condo.

And here's the good news for condo owners: So far this year, condo prices are holding up better than single-family home prices.

Statewide, Warren Group says the median price of a condo fell 3.8 percent in the first three months of the year, compared to the same period last year. My calculations from Warren Group data show similar declines for Metro Boston: 34 percent and 3.3 percent.

Here's the data for towns and neighborhoods with at least 30 sales.

Complete data on every town in the state is available here.

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Greater clarity this morning on local housing prices: The S&P/Case-Shiller Home Prices Indices reports that Boston-area prices dropped 4.6 percent in February. It is the 23rd straight month of year-over-year declines in the index, which has now dropped 12 percent from its peak in September 2005.

Case-Shiller lags the reports from Warren Group and the Massachusetts Association of Realtors, both of which released March data yesterday. But Case-Shiller is more reliable because it is based on repeat sales of the same homes, eliminating any bias caused by a change in the kinds of homes that are selling.

Warren Group reported February sales fell by 9 percent. Case-Shiller says 4.6 percent. The implication is that about half the decline reported by the Warren Group is the result of relatively more sales of lower-priced homes -- and about half is the result of a decline in the sales value of all homes.

(Warren Group yesterday reported an even larger 11 percent decline in March sales prices. It will be another month before we have the Case-Shiller data to help parse those numbers.)

This is the steepest year-over-year decline in the Boston Case-Shiller index since last March. I wrote last month that the pace of price declines had been under 4 percent for several months. The February data breaks that trend.

The relative bright note is that Boston continues to fare better than most other large metropolitan areas. Only Charlotte, Dallas, Portland and Seattle had smaller declines (or in Charlotte's case, a small increase) in sales prices.

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More on foreclosures. Some of you requested data by town. While there are endless ways to crunch the numbers, one of the most interesting to me is the foreclosure rate. I've ranked every Massachusetts city and town by the projected number of 2008 foreclosures per 1,000 residential properties. The list excludes towns with fewer than 1,000 residential properties. The data is courtesy of Warren Group.

Basically, these are the cities and towns with the highest concentrations of foreclosures.

A few notes and observations:

Almost 1,200 Massachusetts properties were seized by mortgage companies in March, an increase of more than 140 percent from the number of foreclosures in March 2007, according to new data from Warren Group.

Massachusetts foreclosures during the first three months of this year topped 2,800, also about 140 percent greater than the number of foreclosures during the first quarter of 2007.

While the profile of the foreclosure issue has diminished somewhat, the numbers underscore that the problem keeps growing. There are no signs as yet that any efforts by the mortgage industry or government officials are reducing the numbers of people losing their homes.

Warren Group reported that mortgage companies seized 1,167 Massachusetts properties in March, compared to 486 properties during the same month last year. Total foreclosures during the first three months of this year:

Month----2008----2007
January----800----350
February----860----350
March----1167----486
TOTAL----2827----1186

The number of foreclosures in March also is the highest since the early 1990s, surpassing the recent high-water mark of 1,018 last August.

An indication the worst is yet to come: The number of petitions to foreclose, an indicator of future foreclosures, climbed by 33 percent to 2,918 in March, compared with 2,189 filed in March 2007.

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A new national study by the Pew Charitable Trusts gives Massachusetts high marks for its response to the rise in foreclosures. The study, “Defaulting on the Dream,” holds up Massachusetts as a model for other states, highlighting the increased regulation of the mortgage industry and various efforts to forestall foreclosures.

This would seem to illustrate the principal that its easier to count the number of proposals announced than the number of people helped. For all the plans announced, we have yet to see evidence of a reduction in the number of foreclosures.

A prime example is the state’s commitment of $250 million to refinance troubled borrowers. The Pew report highlights the refinancing program as a best practice. The reality is that the state has managed to refinance only a small handful of borrowers.

The report also highlights the availability of counseling for people facing foreclosure. But in Massachusetts, as in other states, many borrowers have found that counseling services are unable to convince lenders to provide meaningful assistance.

Most of the success stories I hear involve the intervention of non-profits.

I would be very interested to hear from people who have successfully staved off foreclosure with help from the state or any other quarter. What worked for you?

Foreclosures nationwide more than doubled in March, according to a count by RealtyTrac. The company reported 51,393 bank reposessions last month, compared with 22,491 reposessions -- the final stage in the foreclosure process -- during the same month last year.

Of course, the number is wrong. For example, it includes zero Massachusetts foreclosures. That's right: None. Which I regret to report is not the actual number of foreclosures in Massachusetts last month.

Truth is, foreclosures are very hard to count. As the Los Angeles Times noted a few months ago, "Foreclosure is popularly understood as an event. . . Yet, foreclosure is really a process, one that can stretch over a year and vary from state to state." Furthermore, record-keeping on foreclosures in most states was historically and largely remains completely abysmal.

Assuming the state has any kind of foreclosure records, which many states do not.

"No one is measuring the truth," Mark Zandi, chief economist for Moody's Economy.com, told the Times. "This is a problem when formulating policy."

I keep tripping over reasons for cautious optimism about the health of the Boston real estate market, or at least reasons to believe that our fate is diverging from the fate of the Sun Belt, where real estate prices seem destined to fall sharply.

The latest comes from today's Wall Street Journal, which reviews recent data on the number of homes for sale in various markets. I've grabbed a screen shot of their interactive chart, comparing Boston with three other cities. Los Angeles and Miami show the line of a crash: Up, up and away as homes sit on the market waiting for buyers who are waiting for loans and they all will be waiting for a long time. The third city, Washington, offers an interesting contrast with Boston: Inventory is starting to pile up there, while our inventory levels are holding fairly steady.

Some of you will point out, correctly, that flat inventory can also reflect a market so bad that sellers aren't taking the trouble to list properties. I'm sure this is part of the explanation. Sales volumes certainly have fallen sharply. But in the truly bad markets, a growing number of people are so desperate they have to list their homes. And that much, at least, seems not to be happening around here.

Here's a striking fact from the February issue of Harper's Magazine: Because of the rapid drop in interest rates between 2000 and 2003, "The monthly cost of a mortgage on a $500,000 home fell to roughly the monthly cost of a mortgage on a $250,000 home purchased two years earlier." It was as if the nation had a credit card, and the limit had suddenly doubled.

The line comes from a history of the housing bubble by Eric Janszen, who worked as a venture capitalist during the dotcom bubble. Janszen basically argues that the housing bubble was inflated by the federal government to rescue the economy from the collapse of the dotcom bubble. His forward-looking point is a warning that the government may now try to inflate a new economic bubble. His favored suspect is the alternative-energy industry.

Far more interesting than Janszen's man-behind-the-curtain theory of economic history is his comparison of the housing bubble with the practices of the chemical industry. The housing bubble was fueled by securitization, the practice of selling mortgages as investments, which massively increased the supply of funding for new loans. Janszen argues that securitization is a new instance of the flawed theory that poison can be diluted.

Consider the chemical industry of forty years ago, back when such pollutants as PCBs were dumped into the air and water with little or no regulation. For years, the mantra of the industry was 'the solution to pollution is dilution.' Mixing toxins with vast quantities of air and water was supposed to neutralize them. Many decades later, with our plagues of hermaphrodite frogs , poisoned ground water and mysterious cancers, the mistake in that logic is plain....

Credit pollutants pose the same kind of threat to our economy as chemical toxins do to our environment. Like their chemical counterparts, they tend to concentrate on the weakest and most vulnerable parts of the financial system, and that's where the toxic effects show up first.: The supbrime mortgage market collapse is essentially the Love Canal of our ongoing risk-pollution disaster.

I don't know enough to pass judgment on this argument, but I am struck by an emerging line in many critiques of the housing bubble. The essential argument is that problems were caused by a failure to prevent the worst possible outcomes. Our offense was fine. A lot of people really did get to buy homes. But the defense -- regulation, risk controls, the word 'No' -- the defense failed utterly.

I would welcome your thoughts.

The housing bubble has found its bard. In a catchy song making the Internet rounds, a man with a twang and a guitar sings about the loss of his home. Since these are modern times, there's clever animation, too.

"I got my mortgage and I made my payments/
But my rate reset in my latest statement/
It was 1200, now it's 24/
I'm three months late, so I'm out the door..."

The LA Times tracked down the performers: The singer is a former real estate appraiser who is now working as a Web developer. The animator is a Mexican mask wrestler known to her fans as Crybaby. Neither one owns a home.

I think it's nice that catastrophes so often inspire interesting art. Otherwise it would all just be a waste.

Fascinating piece by David Leonhardt in today's New York Times, ruminating on the roots of the current crisis. What really struck me is the following paragraph:

But people - by "people," I'm referring here to Mr. Greenspan, Mr. Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners - decided that the usual rules didn't apply because home prices nationwide had never fallen before. Based on that idea, prices rose ever higher, so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy. [Boldface added for emphasis.]

Leonhardt is basically arguing that America engaged in a collective act of flawed logic. We inferred that national median housing prices would never fall, because they never had. On that foundation, we made decisions. For example, everyone paying attention trusted that mortgage securities would be safer if they included mortgages from around the country, because even if the market faltered in some regions, it would remain strong in other regions, limiting defaults.

Here's what I find fascinating: Our logic was flawed because it was self-aware.

The federal government remains reluctant to bail out borrowers, but the same reluctance doesn't seem to apply to mortgage lenders. The government spent the weekend pledging billions of dollars to stabilize the nation's investment banking system -- which provides funding to lenders and other corporations.

The impact on the economy will be direct and immediate, James Grant writes in Sunday's Washington Post. The dollar will fall in value because the government is basically promising to increase the number of dollars so it can bail out the lending industry. As a result, gas and other products are going to get more expensive.

The core of the government's plan is to help mortgage companies by agreeing to lend them money against the value of their mortgage loans. (Necessary because other possible lenders aren't so sure those loans are worth much anymore.) The largest example is the government's promise to swallow up to $30 billion in losses to help JPMorgan Chase & Co. buy Bear Stearns.

The housing market had quite a Thursday. First the good news:

Massachusetts residents can borrow significantly more money at low interest rates, to buy homes or to refinance, after the federal government broadened its loan guarantee program. The Federal Housing Administration guarantees to repay lenders if borrowers don't, allowing banks to loan money at lower interest rates. The maximum the government will guarantee increased to $523,750 in the Boston area.

One nice thing about FHA loans: You're much more protected against foreclosure. The government forces lenders to help borrowers who fall behind.

An interesting piece in the Wall Street Journal reviews the history of the FHA program, which began during the Great Depression and is now being revived. By several measures this is the worst housing slump since the Great Depression, so perhaps it's appropriate that the government is resorting to measures developed in the 1930s. It's certainly a reminder of just how grave the current situation has become.

Why do foreclosures drive down real estate prices? The largest reason is that mortgage companies tend to sell foreclosed properties at a discount. More foreclosures -- or more foreclosures in a particular neighborhood -- tend to increase discounts as companies compete for buyers.

RealtyTrac, which tracks such things, reports that last year foreclosed homes in Massachusetts resold for an average of 80 percent of market value. If a home had a market value of $100,000, on average it resold for $80,000. (How do they calculate market value? Short answer: It's an imprecise art.)

The average discount in Massachusetts was smaller than the national average in 2007, which RealtyTrac pegs at 76 percent of market value.

The relatively strong showing puts Massachusetts in the company of other states where foreclosures are mostly the result of lending and borrowing excesses rather than a symptom of sustained economic decline. Consider two states that lead the nation in foreclosure rates: In Nevada, foreclosed homes sell for 79 percent of market value; in Michigan, such homes sell for 65 percent of market value.

A reminder of the deep roots of the housing crisis: In 1994, the Clinton administration published a National Home Ownership Strategy to "achieve an all-time high level of home ownership in America within the next 6 years."

It advocated, among other measures, "...financing strategies, fueled by the creativity and resources of the private and public sectors, to help home buyers that lack cash to buy a home or income to make the payments."

This begat the Bush administration's "Ownership Society." And it worked (although being a federal project, it naturally came in a little behind schedule). The share of Americans who owned homes, stuck at 65 percent from the mid-1970s through the mid-1990s, climbed to a high point of 69 percent in 2004.

And then it didn't work. Home ownership rates fell in 2006, and again in 2007 and probably will fall again in 2008.

A provocative piece in the latest Atlantic Monthly argues that the plague of foreclosures in some suburban areas is an early sign of a broader trend toward suburban decay.

"Many low density suburbs and McMansion subdivisions, including some that are affluent today, may become what inner cities became in the 1960s and '70s," writes Christopher Leinberger. "Slums characterized by poverty, crime, and decay.

Government regulations that limit or delay development -- the so-called Zoning Tax -- accounted for 99 percent of the increase in Boston housing prices between 1989 and 2006, according to a new study by a University of Washington professor.

The basic idea is that limits on development make housing more expensive. In cities with less regulation, developers can build more housing to meet increased demand. In cities with more regulation, increased demand simply results in higher prices.